Downloaded 37 times
![5
Every company that satisfies prescribed threshold is required to spend
at least 2% of its average net profit of 3 preceding financial years on
specified CSR activities
Section 3(d) of the proposed CSR Rules, defines Net Profit for
domestic company as: “Net profit before tax as per books of
accounts and shall not include profits arising from branches
outside India‘
“Net profit” for a foreign company means the net profit as per profit
and loss account prepared in terms of section 381(a)(1) read with
section 198 of the Companies Act, 2013.
The ‘average net profit’ shall be calculated in accordance with
section 198 [i.e., calculation of net profit prescribed for the purpose of
determining the maximum managerial remuneration]
AMOUNT TO BE SPENT ON CSR ACTIVITIES](https://image.slidesharecdn.com/csrcompaniesact13-150110000144-conversion-gate01/85/Corporate-Social-Responsibility-from-Tax-Perspective-5-320.jpg)
Uploaded byKaran Sahi
Corporate Social Responsibility from Tax Perspective
The document discusses the key aspects of corporate social responsibility (CSR) requirements for companies in India according to the Companies Act 2013. It covers topics such as the criteria for applicability of CSR spending requirements, computation of net profits, constitution of CSR committees, eligible CSR activities, modes of implementation, reporting requirements, deductions available, and penalties for non-compliance. It also provides a comparison of CSR practices in other countries and poses some questions for further discussion on interpreting certain aspects of India's CSR rules.
Law◦
More Related Content
Similar to Corporate Social Responsibility from Tax Perspective
Corporate Social Responsibility from Tax Perspective
- 2. April 2014 Copyright- Anil Chawla Law Associates LLP 2 A. Meaning of CSR B. Applicability & Spending C. Constitution of CSR Committee D. Implementation of CSR Strategy E. CSR Activities F. Mode of Carrying CSR Activities G. Reporting Requirements H. Analysis of CSR Spending I. Penalties J. Brainstorming Questions
- 3.
- 4. A1. Companies Responsiblefor CSR • Net Worth of Rs. 500 Crores (Rs. Five Billion) or more OR • Turnover of Rs. 1000 Crores (Rs. Ten Billion) or more OR • Net Profit of Rs. 5 Crores (Rs. Fifty Million) or more April 2014 Copyright - Anil Chawla Law Associates LLP 4 Every company (whether private or public) with:CRITERIA Net Worth ≥ Rs. 500 Cr. Turnover ≥ Rs. 1,000 Cr Net Profit ≥ Rs. 5 Cr.
- 5. 5 Every companythat satisfies prescribed threshold is required to spend at least 2% of its average net profit of 3 preceding financial years on specified CSR activities Section 3(d) of the proposed CSR Rules, defines Net Profit for domestic company as: “Net profit before tax as per books of accounts and shall not include profits arising from branches outside India‘ “Net profit” for a foreign company means the net profit as per profit and loss account prepared in terms of section 381(a)(1) read with section 198 of the Companies Act, 2013. The ‘average net profit’ shall be calculated in accordance with section 198 [i.e., calculation of net profit prescribed for the purpose of determining the maximum managerial remuneration] AMOUNT TO BE SPENT ON CSR ACTIVITIES
- 6. COMPUTATION OF PROFITAS PER SEC 198 6 +/- Particulars Amount Net profit after tax XX + Allowed Credits XX - Credits Disallowed X + Expenses Allowed X - Expenses Disallowed XX Allowed Credits Expenses allowed Expenses Disallowed Credit Disallowed Profit on sale of immovable property ( Original Cost – WDV ) Premium on shares or debentures , Profit on sale of forfeited shares , Surplus in P&L on measurement of asset or liability at fair value Usual Working Charges , Director’s Remuneration, Bonus or Commission paid to Staff , Interest on Loans, Depreciation. Income Tax ,Compensations, damages or payments made voluntarily ,Capital Loss on sale of undertaking or part thereof
- 7. CONSTITUTION OF CSRCOMMITTEE PRIVATE COMPANY PUBLIC COMPANY Composition of CSR committee should be 3 or more directors. Out of which at least 1 director shall be an independent dIrector Composition of CSR committee should be 3 or more directors; If there is no independent director, then any 3 directors may be members of CSR committee. Foreign COMPANY Consist of atleast 2 Person Out of which 1 shall be as specified u/s 380(d)(1) Other nominated by foreign Company
- 8. CSR COMMITTEE ROLEOF THE BOARD Formulate & Recommend a CSR Policy Recommend CSR Initiatives Monitor CSR expenditure Form CSR Committee Approve CSR Policy Ensure Implementation Disclose CSR Policy on the company’s website Disclose reasons for not spending amount
- 9. STAGES EXPECTED OUTPUT COMPLIANCE CHECK STRUCTURING OPTIONS CSRPOLICY DRAFTING Program implementation & monitoring Review & Reporting COMPLIANT LIST OF CSR PROJECT IDENTIFIED CSR SPENDS IDENTIFIED IMPLEMENTATION STRUCTURE STREAMLINED NEW AREAS IDENTIFIED CSR POLICY DRAFTED TAX IMPLICATION IDENTIFIED CREATING SOPS REALIBLE DATA IMPACT ASSESSMENT REPORT ANNUAL CSR REPORT
- 10. Eradication of Hunger & Poverty Protectionof National Heritage, Art & Culture Environment Sustainability Benefit of Armed Forces Veterans Training to Promote Rural Sport Contribution to PM National Relief Fund Rural Development Project Gender Equality & Women Empowerment Swachh Bharat Abhiyan
- 11. Restriction on Activities Activitiesnot mentioned in Company’s CSR Policy – Rule 4(1) Activities conducted in normal course of business – Rule 4(1) Activities conducted outside India – Rule 4 (4) Activities benefitting only employees or families not allowed – Rule 4 (5) Building CSR capabilities of employees beyond 5% of CSR expenditure – Rule 4(6) Contribution to political party – Rule 4(7)
- 12. Mode of CarryingCSR Activities Trust / Society / section 8 company set up by the company or its subsidiary / holding / associate company Independent entity having three years track record Collaboration with other companies
- 13. ALTERNATE 1 ALTERNATE2 ALTERNATE 3 COMPANY 1 COMPANY 2 COMPANY 1 COMPANY 2 In-house CSR Activity Govt Schemes / Independent NGOs Not For-profit arm of the group CSR ACTIVITIES CARRIED OUT BY EMPLOYEES Donation to government schemes / independent NGOs Corporate group forms separate not- for Profit arm to carry out CSR activities
- 14. Directors’ Reportto include contents of CSR Policy {Sec. 135(4)(a)} Directors’ Report to General Meeting to include a report about CSR initiatives as per format in Rule 8 { CSR POLICY RULES 2014 } Company website to disclose company’s CSR Policy as per Rule 9 { CSR POLICY RULES 2014 } If there is a failure to spend CSR amount, Board shall in its report specify the reasons – Sec. 135(5)
- 15. 1 2 34 5 6 7 8 SNO . CSR PROJECT OR ACTIVITY IDENTIFI -ED SECTOR IN WHICH THE PROJECT IS COVERED PROJECT OR PROGRAMME 1) LOCAL AREA 2) SPECIFY THE STATE AND DISTRICT AMOUNT OUTLAY PROJECT OR PROGRAM WISE AMOUNT SPENT ON THE PROJECTS OR PROGRAM TOTAL EXPEN- DITURE UPTO DATE AMOUNTS SPENT : DIRECT OR THROUGH IMPLEM- ENTING AGENCY 1 2
- 16. PENALTY ON NON REPORTING COMPANYOFFICER IN DEFAULT MAX FINE - 25 LACS MIN FINE - 0.50 LACS IMPRISONMENT- UPTO 3 YEARS FINE 50,000 TO 5 LACS
- 18. Section Deduction availablefor Deduction (AMOUNT) 35(1)(ii) Sum paid to research association university, college or other institution to be used for scientific research 1.75 TIMES OF SUM 35(1)(iia) Sum paid to a scientific R&D company for scientific research. 1.25 TIMES OF SUM 35(1)(iii) Sum paid to research association, university college or other institution to be used in social science. 1.25 TIMES OF SUM 35(2AA) Any sum paid to National Laboratory or a University or IIT or a specified person with a direction that such sum is to be used for scientific research 2 TIMES OF SUM 35CCC Any expenditure on agricultural extension project notified by CBDT 1.5 TIMES OF SUM 35CCD Any expenditure (not being expenditure in the nature of cost of any land or building) on any skill development project notified by CBDT 1.5 TIMES OF SUM 35AC Sum paid to public sector company/local authority/ Etc for carrying out any eligible notified project for promoting social and economic welfare of the public 1TIME OF SUM Section Deduction available for Deduction (AMOUNT) 35(1)(ii) Sum paid to research association university, college or other institution to be used for scientific research 1.75 TIMES OF SUM 35(1)(iia) Sum paid to a scientific R&D company for scientific research. 1.25 TIMES OF SUM 35(1)(iii) Sum paid to research association, university college or other institution to be used in social science. 1.25 TIMES OF SUM 35(2AA) Any sum paid to National Laboratory or a University or IIT or a specified person with a direction that such sum is to be used for scientific research 2 TIMES OF SUM 35CCC Any expenditure on agricultural extension project notified by CBDT 1.5 TIMES OF SUM 35CCD Any expenditure (not being expenditure in the nature of cost of any land or building) on any skill development project notified by CBDT 1.5 TIMES OF SUM 35AC Sum paid to public sector company/local authority/ Etc for carrying out any eligible notified project for promoting social and economic welfare of the public 1TIME OF SUM
- 19. COMPANY SHOULD PROVIDE DONATIONS TOTRUST WHOSE ACTIVITIES ARE ALIGNED TO SOCIAL ACTIVIES CONTAINED IN SCHEDULE VII OF CA 2013
- 21. NO DEDUCTIONS U/S37 OF IT ACT 1961 CSR RULES CEARLY DEFINES ACTIVITIES WHICH SHALL NOT BE CONDUCTED IN REGULAR COURSE OF BUSINESS.
- 23. S.No. Name of Country Whether CSRspend / reporting mandatory 1 U.K Voluntary guidelines 2 U.S.A Voluntary guidelines 3 Germany Voluntary guidelines 4 France Mandatory reporting for listed companies in Annual reports 5 Denmark Investors and state owned companies to include information on CSR in their annual Financial reports 6 Sweden Mandatory reporting by state - owned companies 7 Indonesia Natural Resource based companies must allocate budgets for CSR programs and the programs must be run according to government regulations 8 Malaysia Compulsory for companies listed on Bursa Malaysia to disclose their CSR activities or practices
- 25. CSR applicableon group companies or individual holding/Subsidiary Company ? Provision of CSR applicable on Section 8 Companies ? Donation of money to a trust by a company be treated as CSR Expenditure? In case multi-locational operations, What shall be area of “preferential locations” ? Salary paid to staff for CSR activities included in CSR Activities? CSR provision applicable on Foreign Company having only Project office One off event like Marathon , Advertisement campaign be considered as CSR ? Expenditure made by Foreign Holding eligible as expense for Indian Subsidiary co. ?